Caterpillar Inc. (CAT) in line with its strategy to capitalize on the projected economic boom in Brazil is planning a new operation for packaging generator sets and diesel electric propulsion systems at its Piracicaba, Sao Paulo facility to cater to marine and petroleum customers in the largest country in South America. Operations to package 3500C series engines will begin in the third quarter of 2011.
The 3500C series packages for diesel electric propulsion and marine auxiliary power have a performance track record in marine applications. They are commonly utilized in tug and salvage, cargo and offshore applications. The 3500 diesel electric propulsion and marine auxiliary power generation had met with good response in the Brazilian offshore market, and the company will continue to develop high-speed and medium-speed offerings for its offshore customers.
Caterpillar’s presence in Brazil goes back more than 80 years and its manufacturing operations in that country dates back to 1960. With the current venture, Caterpillar will capitalize on its existing factory in Piracicaba and leverage its local expertise to manufacture solutions for the marine and petroleum markets there.
The company believes that these products will fulfill the requirements of key customers in the region, particularly as Brazil develops the new Pre-salt reserves. Recently, significant oil and natural gas reserves have been discovered off the coast of Brazil. These resources are extracted from a geological formation known as the Pre-salt layer. The need for reliable offshore power for marine and petroleum applications is expected to increase as Brazil's petroleum reserves are developed and expanded.
The strategic decision to expand operations in Brazil is part of Caterpillar’s long-term global strategy for growing its business in key growth markets. This move will enable Caterpillar to meet demand from its growing base of customers in Latin America. The company has plans to lay out $3 billion in capital expenditures in 2011, a move that we believe would boost its long-term potential. We expect Caterpillar to maintain its revenue growth trajectory aided by growth in emerging markets as well as construction and mining in developing countries. Increased domestic and international infrastructure spending, improved economic conditions and benefits from the yet-to-be closed acquisitions will support revenues over the next several years. The company currently has a Zacks #1 Rank (short-term Strong Buy recommendation).
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Effective from the first quarter of fiscal 2011, Caterpillar is focused on its newly aligned segments, namely Machinery and Power Systems (which represents the aggregate total of Construction Industries, Resource Industries, Power Systems, and all Other segments and related corporate items and eliminations) and Financial Products. Caterpillar competes with the likes of CNH Global NV (CNH), Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY).
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